The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage decreased 3 basis points since last week to 5.04% while the purchase application volume decreased 5.2% and the refinance application volume declined 16.2% compared to last week’s results.

It’s important to recognize that while the Federal Reserve’s “quantitative easing” measures have worked to push down fixed rates and resulting in two separate booms of refinance activity earlier in the year and what appears to be a third one shaping up now, purchase activity still appears to have been only lightly effected.

Even with historically low lending rates both refinance and purchase application volume appears lackluster and possibly even still in an overall declining trend.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).